Clover Health In Talks to Go Public Via Social Capital III
Clover Health In Talks to Go Public Via Social Capital III
(Bloomberg) -- Clover Health Investments Corp., an insurance startup backed by Alphabet Inc. and Sequoia, agreed to go public through a merger with Social Capital Hedosophia Holdings Corp. III, the latest in a wave of deals with blank-check companies to list shares on exchanges.
The deal values Clover at $3.7 billion, including debt, according to a statement Tuesday, confirming an earlier Bloomberg report. Clover will receive as much as $728 million, and $500 million more will be allocated to other Clover investors, the companies said.
The deal will be supported by a $400 million investment from Social Capital III Chief Executive Officer Chamath Palihapitiya and investors including Fidelity Management & Research Co. and Senator Investment Group LP.
The startup offers Medicare Advantage plans in 34 counties across seven U.S. states for 57,000 members, according to a press release in July, and plans to expand coverage to 74 additional counties. Clover raised about $500 million in a round led by existing investor Greenoaks Capital in January 2019, TechCrunch reported at that time.
“We need companies like Clover to help fix our broken health-care system,” Palihapitiya said in the statement. “The company’s rapid growth is a testament to the effectiveness of its tech-enabled approach, which resonates powerfully with consumers and physicians alike.”
Social Capital III shares fell 11% to $12.24 at 9:32 a.m. in New York. They have gained 23% since going public in April.
Clover’s Leadership
Clover CEO Vivek Garipalli and President Andrew Toy, co-founders of the company, will continue to lead Clover, and Palihapitiya will serve as senior adviser to the company’s management. Garipalli and Toy will roll all of their equity in Clover into the new company.
Social Capital III, backed by venture capitalist Palihapitiya and longtime investor Ian Osborne, raised $720 million in an up-sized initial public offering in April.
Social Capital raised its first special purpose acquisition company in 2017. It’s ramping up its offerings amid a surge in popularity for the investment vehicles. SPACs provide way for companies to gain a listing without the scrutiny or risks of an initial public offering.
Blank-check companies have raised $48 billion in the U.S. this year, more than the past decade combined, according to data compiled by Bloomberg. United Wholesale Mortgage agreed last month to merge with Alec Gores’s SPAC, Gores Holdings IV Inc., in a deal that valued it at $16 billion, the largest deal in which a company went public by combining with a blank-check firm.
The Social Capital partnership is seeking to raise at least $2 billion for three new blank-check companies, according to filings last month that confirmed a Bloomberg report.
Opendoor, Virgin
Social Capital Hedosophia Holdings Corp. II, another blank-check company by the partnership, agreed to merge with property technology Opendoor last month. Social Capital’s first SPAC merged with billionaire Richard Branson’s space company to form Virgin Galactic Holdings Inc.
The Clover deal is scheduled to close in the first quarter of 2021.
Connaught and Credit Suisse Group AG were financial advisers to Social Capital III, which received legal advice from Skadden Arps Slate Meagher & Flom LLP. Clover’s financial advisers were Citigroup Inc., JPMorgan Chase & Co. and Jefferies Financial Group Inc., while Orrick Herrington & Sutcliffe LLP served as legal adviser.
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